US Policy Frenzy Strikes! Can the Crypto Market Reverse Its Fortunes?

TradingKey - Multiple favorable US policies are poised to propel the crypto market back to its peak; however, caution is warranted regarding potential hawkish actions by the Federal Reserve.

On Friday, December 12, several policy tailwinds emerged in the crypto market, boosting a collective rebound in cryptocurrencies. The total market capitalization recovered to $3.14 trillion, marking a more than 10% rebound from last month's low of $2.82 trillion. However,will this crypto market rally sustain its momentum and reclaim its October 7 peak of $4.28 trillion?
Total Cryptocurrency Market Cap, Source: CoinMarketCap.

According to Cryptopolitan reported on December 12, members of the U.S. House Financial Services Committee urged the Securities and Exchange Commission (SEC) to promptly update securities regulations. This update would allow a broader range of individuals, beyond just wealthy or high-net-worth investors, to invest in digital and alternative assets through 401(k) plans. The expanded group should include those with professional licenses, relevant work experience, or who can pass a competency exam.

In August 2025, U.S. President Trump signed an executive order requiring federal agencies to broaden the investment scope for retirement planners, allowing 401(k) investors to choose a wider array of assets, including digital assets. However, approximately four months have passed since the executive order was issued, yet it has not yet entered an effective implementation phase.There is an urgent need for its implementation to drive new buying power into the crypto market.

A second significant positive development comes from the U.S. SEC, where Chairman Paul Atkins has recently frequently signaled favorable regulatory sentiment,potentially injecting new momentum into the crypto market next year.Speaking at the Blockchain Association Policy Summit in Washington D.C., Paul Atkins stated that "all the seeds we have sown (regulatory proposals) will begin to sprout and grow next year," hinting at the gradual implementation of the Trump administration's crypto regulatory policies, which would help stabilize market confidence.

Meanwhile, Paul Atkins also indicated that "the U.S. financial market is transitioning to on-chain operations." This could be a mythic boon for the crypto market, especially the Real World Assets (RWA) sector, given the immense size of the U.S. financial market. The capital influx from this shift could potentially surpass that of spot ETFs for cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH).

The third major positive is theFinancial Stability Oversight Council (FSOC) considering regulatory easing.U.S. Treasury Secretary and FSOC Chair Besant announced on December 11 that "the Trump administration is reforming government regulators responsible for monitoring financial system risks, and the FSOC will shift its focus to easing financial rules."

These three positive developments are not only beneficial for activating existing market capital but also highly likely to attract substantial funds from the traditional U.S. financial market into the crypto space. This suggests thatmarket capitalization could once again rebound to previous highs next year.However, a cautionary note: if the Federal Reserve pursues hawkish policies and tightens liquidity, the impact of these regulatory benefits would be significantly diminished, limiting capital, especially hot money, from flowing in.